Question 1

Under the doctrine of respondeat superior, a corporation can be held liable for

Accepted Answer

A)  acts perpetrated by its market competitors. 
B)  breaches of contract by its customers and suppliers. 
C)  torts committed by its agents or officers. 
D)  none of the choices.

Question 2

Corporate bonds

Accepted Answer

A)  represent the true ownership of a corporation. 
B)  have priority over holders of common stock as to payment of dividends. 
C)  require a corporation to remain profitable until maturity. 
D)  provide a proportionate interest in a corporation with regard to control.

Question 3

Welding Corporation makes a good faith attempt to incorporate but there is a defect in its incorporation. Welding undertakes business as a corporation. In this circumstance, the firm's existence may be challenged by

Accepted Answer

A)  any third party. 
B)  the state. 
C)  a director, officer, or shareholder. 
D)  any corporation with which it does business.

Question 4

Masonry Inc.'s stated purpose is to perform the stonework on buildings and other structures. Masonry contracts with New Contracting to pour the pilings for a bridge's foundation despite lacking the skill and license to do the work. This is most likely

Accepted Answer

A)  an ultra vires act. 
B)  within the corporation's express powers. 
C)  within the corporation's implied powers. 
D)  allowable and proper as an act to profit corporate shareholders.

Question 5

Limited liability business forms, such as LLCs, LPs, and LLPs, offer tax advantages that are similar to those offered by

Accepted Answer

A)  an S corporation. 
B)  a benefit corporation. 
C)  a close corporation. 
D)  any corporation.

Question 6

Adapt Inc. is formed to coordinate the design and delivery of projects and products to help communities cope with the effects of climate change. The stated purpose is to have a material positive impact on society and the environment, and to make a profit. Adapt is

Accepted Answer

A)  a nonprofit corporation. 
B)  not a corporation. 
C)  a benefit corporation. 
D)  a public corporation.

Question 7

The directors of a benefit corporation must, during the decision-making process, consider the impact of a decision on society and the environment.

Accepted Answer

A) True 
 B)False

Question 8

A corporation whose shares are held by relatively few persons is a close corporation.

Accepted Answer

A) True 
 B)False

Question 9

A business firm whose shares are held by a single person may be a sole proprietorship, but it cannot be a corporation.

Accepted Answer

A) True 
 B)False

Question 10

To bring a corporation into existence requires securing a corporate name that is

Accepted Answer

A)  the same or deceptively similar to the name of an existing corporation. 
B)  selected by the state of incorporation, for convenience and cost. 
C)  promises to attract financial support from investors. 
D)  available as a domain name, subject to state approval.

Question 11

Sweetwater Corporation is incorporated in Texas. Outside that state, within the United States, the firm is

Accepted Answer

A)  a domestic corporation. 
B)  a foreign corporation. 
C)  an alien corporation. 
D)  a corporation by estoppel.

Question 12

When a shareholder commingles personal and corporate interests so that the firm has no separate identity, the shareholder may be held liable for the firm's debts.

Accepted Answer

A) True 
 B)False

Question 13

Corporate resolutions of the corporation's board of directors provide guidelines but cannot grant or restrict corporate powers.

Accepted Answer

A) True 
 B)False

Question 14

Because bonds do not represent debt, they need never be repaid.

Accepted Answer

A) True 
 B)False

Question 15

Funds invested in an existing corporation to buy and reorganize it, and possibly sell shares in the reorganized company in an initial public offering, are known as

Accepted Answer

A)  preferred shares of corporate stock. 
B)  private equity capital. 
C)  crowdfunds. 
D)  corporate bonds.

Question 16

The primary document needed to incorporate a business is the bylaws-the primary source of guidelines for the firm's management and operation.

Accepted Answer

A) True 
 B)False

Question 17

Because a close corporation is one whose shares are held by a relatively small group of persons, the firm often operates like a partnership.

Accepted Answer

A) True 
 B)False

Question 18

To prevent a majority shareholder from dominating the management and operation of a close corporation, the firm should

Accepted Answer

A)  require more than a majority of directors approve any board action. 
B)  restrict the transferability of shares to outside persons. 
C)  reorganize into a sole proprietorship or partnership. 
D)  hold special shareholders' or directors' meetings on an annual basis.

Question 19

A foreign corporation that has not obtained a certificate of authority to do business in a state can nevertheless maintain an action in the state's courts.

Accepted Answer

A) True 
 B)False

Question 20

Cattle Ranch Inc. is a for-profit corporation that is owned by six shareholders who are members of the same family. Cattle Ranch is

Accepted Answer

A)  an S corporation. 
B)  a close corporation. 
C)  a benefit corporation. 
D)  a public corporation and a private corporation.

Exam 33: Corporate Formation and Financing

Under the doctrine of respondeat superior, a corporation can be held liable for

Corporate bonds

Welding Corporation makes a good faith attempt to incorporate but there is a defect in its incorporation. Welding undertakes business as a corporation. In this circumstance, the firm's existence may be challenged by

Masonry Inc.'s stated purpose is to perform the stonework on buildings and other structures. Masonry contracts with New Contracting to pour the pilings for a bridge's foundation despite lacking the skill and license to do the work. This is most likely

Limited liability business forms, such as LLCs, LPs, and LLPs, offer tax advantages that are similar to those offered by

Adapt Inc. is formed to coordinate the design and delivery of projects and products to help communities cope with the effects of climate change. The stated purpose is to have a material positive impact on society and the environment, and to make a profit. Adapt is

The directors of a benefit corporation must, during the decision-making process, consider the impact of a decision on society and the environment.

A corporation whose shares are held by relatively few persons is a close corporation.

A business firm whose shares are held by a single person may be a sole proprietorship, but it cannot be a corporation.

To bring a corporation into existence requires securing a corporate name that is

Sweetwater Corporation is incorporated in Texas. Outside that state, within the United States, the firm is

When a shareholder commingles personal and corporate interests so that the firm has no separate identity, the shareholder may be held liable for the firm's debts.

Corporate resolutions of the corporation's board of directors provide guidelines but cannot grant or restrict corporate powers.

Because bonds do not represent debt, they need never be repaid.

Funds invested in an existing corporation to buy and reorganize it, and possibly sell shares in the reorganized company in an initial public offering, are known as

The primary document needed to incorporate a business is the bylaws-the primary source of guidelines for the firm's management and operation.

Because a close corporation is one whose shares are held by a relatively small group of persons, the firm often operates like a partnership.

To prevent a majority shareholder from dominating the management and operation of a close corporation, the firm should

A foreign corporation that has not obtained a certificate of authority to do business in a state can nevertheless maintain an action in the state's courts.

Cattle Ranch Inc. is a for-profit corporation that is owned by six shareholders who are members of the same family. Cattle Ranch is